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New-Home Buyers Taking Advantage of Market Conditions

Waiting for the housing market to rebound before taking the plunge to buy a new home? Past trends show that consumers who wait for the market to rebound often miss out on the best opportunities to take advantage of homeownership opportunities. And in today’s confusing housing market, it is more and more difficult to “time the market” in hopes of buying low and selling high.

Contrary to some sensational headlines of the national housing market, conditions are largely favorable to buyers in Kansas City. The market share of subprime loans and the foreclosure rate are all substantially lower in the metro region than nationwide. According to Moody’s Econom.com, metro home values were expected to level off in late 2007 and resume rising in 2008 with Kansas City experiencing no correction in housing values. And unlike some parts of the country that saw astronomical and unsustainable price appreciation, the local market has seen steady growth in housing values during recent years.

In fact, Forbes.com recently put the advantage of selling existing homes in Kansas City in the favor of sellers, citing falling inventories of vacant homes, strong housing values and positive job growth. The magazine ranked Kansas City as the No. 5 major market in the nation for home sellers in 2008.

These factors combine to give consumers looking to sell their existing home a unique advantage in today’s market. The ability to sell an existing home while buying a new home when prices are competitive is the ideal scenario consumers envision why buying a new home. Add low mortgage rates hovering around 6 percent and the advantage is markedly in the favor of buyers in the current market.

What makes the current market more advantageous than for buyers who opt to wait? A major factor in any new-home purchase is price. While sales prices have remained largely competitive locally, prices still rose 6 percent last year and are forecast to increase again this year. Cost inflation for building materials including lumber and metals and soaring energy costs have increased the price for virtually every component of a new home. As new-home production recovers and demand rises, prices will continue to increase. Consumers buying a new home a year from now will likely pay more than a family buying in today’s market.

While housing is most certainly an investment, it’s not like a stock that can be sold several times in the course of a single day. A home is a long-term investment with dividends that are earned over a lifetime of homeownership. Buying a new home during a slow down has historically proven to be a winning formula. During the last national housing downturn in the early 1990s, the average new-home price was around $120,000. Last year, the average new-home price was $246,900 – more than double what buyers paid just 15 years ago.

Just as in any market, the winners are buyers who see the advantages in their favor and take the opportunity to buy at a time that gives them the greatest opportunity for success in the future.

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